Capital Markets

BAT share price tumbles to lowest since 2015 after profit fall

BAT Kenya’s #ticker:BAT share price has fallen to a two-and-a-half year low at the NSE following the announcement of a decline in profit and dividend for the full year ended December 2017.

The stock was trading at Sh680 per share on Wednesday, the lowest price since September 2015, having shed 13.5 per cent or Sh106 since the announcement of results three weeks ago.

The company is operating under an increasingly difficult regulatory environment following the enactment of new laws meant to curb tobacco consumption, which has been linked to cancer.

“BAT retreated to its lowest level since September 2015, mainly on foreign investor buying as the tobacco maker found support at the lower level after the rather disappointing 2017 results,” said Standard Investment Bank in a market update.

The firm reported a 21.2 per cent drop in net profit for the full year to Sh3.3 billion, attributing this to lower sales in the wake of a weak performance in the Kenyan and export markets.

Its volumes were also affected by floods and drought during the 2017 planting season, while local sales were also affected by excise tax increments.

As a result of the declining revenue, the firm’s dividend payout also fell as the firm departed from its policy of paying out the entire net earnings to shareholders as dividends.

This has disappointed investors who have been enjoying steadily higher pay-outs in recent years, a key factor in driving the share price to the upper triple digits.

BAT paid a dividend of Sh43 in 2016, having reported a net profit of Sh4.2 billion in the year.

“We await to see whether the change in pay-out policy is a one-off or will remain as this will have a significant impact on investor expectations,” said Dyer & Blair Investment Bank in their analysis of the company’s results.

On its part, BAT has cited unpredictable tax increases as an ongoing threat to its Kenya business, calling on the government to introduce a more stable tax environment to allow the company to predictable operating environment.